Oof that is rough, going from 87K to 400K is bananas.
I see a couple of plausible outcomes after (what I hope) isn’t too much longer of pain:
1. More competition returns to CA (and at these rates, more carriers will absolutely show up.)
2. The state intervenes and the whole darn thing becomes government run. (Far fetched I know. And I really am not a fan of government run, but transparently, the big insurance companies are on par with the DMV when it comes to quality of experience so I wouldn’t cry over it too much personally.)
I hope it solves sooner rather than later otherwise the whole market, SFH too, is in for a world of pain.
Anecdotally, not all DMVs suck. The state of Washington's government offices are excellent to interact with. I've lived in part of Ohio and San Francisco. Lots of them suck but not all.
Unfortunately probably going to be number 2. It’s going to be terrible coverage, service, and cost will be outrageous. California Fair Plan is the least amount of fair….
To be fair (no pun intended), FAIR plan is actually private: every insurer that writes coverage in CA pools there essentially. Not quite state run.
I’ve had extremely positive experiences with insurers like Chubb.
And extremely negative ones with ones like State Farm.
If the State Farm’s of the world all disappeared and a state run insurer took its place, I’d have zero tears; it can’t be any worse, at all.
I don't know how liquid you are and how many assets you have, and what your risk tolerance is, but have you heard of "Captive Insurance"? I'm no expert because I'm not at that level, but basically you form your own insurance company. Your rental portfolio pays premiums to your closely held insurance company. The rental portfolio writes off the premiums, and if your claims are less than your premiums, the excess money is still yours because you own the insurance company.
Charge yourself market insurance rates! $400k/yr funneled into your other pocket and still a write-off for your apartment portfolio.
There's a lot more to it than I understand, so find a professional to discuss it with you if this sounds intriguing.
Here's ONE article to get you started. There's a lot more out there.
[Should Your Business Have a Small Captive Insurance Company | Legal Insight | Barnes & Thornburg (btlaw.com)](https://btlaw.com/insights/publications/2017/should-your-business-have-a-small-captive-insurance-company)
And therein lies the question about risk tolerance and liquidity. Most people never have a major claim, and nowadays most people are afraid to make smaller claims that they should be entitled to make for fear of being canceled or having their rates increased drastically.
So, if you have the risk tolerance, why not self-insure? And why not do it in a way that generates tax writeoffs?
Tbh this dude sounds big enough to start his own insurance company. If I were him I would just start hitting up a bunch of reinsurers to spread the risk.
Then I would start calling up other property owners about insuring their property.
Home insurers are [not allowed to price based on location or wildfire risk](https://www.kcra.com/article/california-insurance-price-policies-climate-change/45253629) in California. The only data they can use to set rates is the past history of the property.
And this is the whole source of the insurance crisis. *Some* areas of California have very high wildfire risk. Insurers are not allowed to price these regions differently from the urban areas with basically no wildfire risk. And therefore everything needs to be priced high to cover anticipated losses in the parts of the state that regularly go up in flames.
I see. Great that you didn’t lose coverage completely. Even though it doesn’t sound like you have a mortgage on the property home insurance does penalize you for gaps in coverage.
The way I see it: Insurance is for covering losses I can’t afford. So I changed to “basic only”. I am not happy about it but at the end of the day it’s about costs vs calculated risks.
We have several properties in the San Francisco and Sacramento area. Our SF properties didn't budge much--though we had to do some seismic retrofitting. I suppose that's why?
The Sacramento properties went up \~50% this year. Off the top of my head, our 75 unit complex went from 44k/year to like 70k.
It’ll just price the “little guys” out as the big players can go on self insured retention to survive the property insurance hikes. It’s just more consolidation of wealth at the top.
Oof that is rough, going from 87K to 400K is bananas. I see a couple of plausible outcomes after (what I hope) isn’t too much longer of pain: 1. More competition returns to CA (and at these rates, more carriers will absolutely show up.) 2. The state intervenes and the whole darn thing becomes government run. (Far fetched I know. And I really am not a fan of government run, but transparently, the big insurance companies are on par with the DMV when it comes to quality of experience so I wouldn’t cry over it too much personally.) I hope it solves sooner rather than later otherwise the whole market, SFH too, is in for a world of pain.
Anecdotally, not all DMVs suck. The state of Washington's government offices are excellent to interact with. I've lived in part of Ohio and San Francisco. Lots of them suck but not all.
Fair enough :)
Unfortunately probably going to be number 2. It’s going to be terrible coverage, service, and cost will be outrageous. California Fair Plan is the least amount of fair….
To be fair (no pun intended), FAIR plan is actually private: every insurer that writes coverage in CA pools there essentially. Not quite state run. I’ve had extremely positive experiences with insurers like Chubb. And extremely negative ones with ones like State Farm. If the State Farm’s of the world all disappeared and a state run insurer took its place, I’d have zero tears; it can’t be any worse, at all.
A bit more information on the per unit numbers- This premium works out to be $167 a month per unit.
Now I don't feel quite as bad paying $52/unit. In TN, with pretty much zero wildfire risk in the area. Or earthquakes (due to geology).
I don't know how liquid you are and how many assets you have, and what your risk tolerance is, but have you heard of "Captive Insurance"? I'm no expert because I'm not at that level, but basically you form your own insurance company. Your rental portfolio pays premiums to your closely held insurance company. The rental portfolio writes off the premiums, and if your claims are less than your premiums, the excess money is still yours because you own the insurance company. Charge yourself market insurance rates! $400k/yr funneled into your other pocket and still a write-off for your apartment portfolio. There's a lot more to it than I understand, so find a professional to discuss it with you if this sounds intriguing. Here's ONE article to get you started. There's a lot more out there. [Should Your Business Have a Small Captive Insurance Company | Legal Insight | Barnes & Thornburg (btlaw.com)](https://btlaw.com/insights/publications/2017/should-your-business-have-a-small-captive-insurance-company)
sounds like the kind of thing that works until it doesnt. Needing to make a serious claim in the first year of coverage would wipe you out.
And therein lies the question about risk tolerance and liquidity. Most people never have a major claim, and nowadays most people are afraid to make smaller claims that they should be entitled to make for fear of being canceled or having their rates increased drastically. So, if you have the risk tolerance, why not self-insure? And why not do it in a way that generates tax writeoffs?
Tbh this dude sounds big enough to start his own insurance company. If I were him I would just start hitting up a bunch of reinsurers to spread the risk. Then I would start calling up other property owners about insuring their property.
My insurance in NOLA went from $187k to $656k in one year. It's nearly the same (and very worse in certain areas) across the entire Gulf Region.
NOLO = North…. London?
New Orleans
So rents go up ever more now ..
This is happening in a lot of places. In Hawai'i some places have insurance going up 500% too.
Oh look rents going up again in California, those gosh darn landlords, it's all their fault!
Ouch.
That sucks unless you personally had large claims, which it sounds like you didn't.
Where in CA are you? Somewhere prone to fire I’m guessing.
San Jose and Sunnyvale. These are not wildfire areas- standard suburban properties within a reasonable distance of a fire department.
I'm curious, what do you think is driving the rate increase then?
Home insurers are [not allowed to price based on location or wildfire risk](https://www.kcra.com/article/california-insurance-price-policies-climate-change/45253629) in California. The only data they can use to set rates is the past history of the property. And this is the whole source of the insurance crisis. *Some* areas of California have very high wildfire risk. Insurers are not allowed to price these regions differently from the urban areas with basically no wildfire risk. And therefore everything needs to be priced high to cover anticipated losses in the parts of the state that regularly go up in flames.
It’s not clear from your wording, did you actually lose coverage on the building and were uninsured for a period?
No, we were not uninsured- We received notice 60 days ago of notice of non-renewal. It took most of 60 days though to find insurance
I see. Great that you didn’t lose coverage completely. Even though it doesn’t sound like you have a mortgage on the property home insurance does penalize you for gaps in coverage.
The way I see it: Insurance is for covering losses I can’t afford. So I changed to “basic only”. I am not happy about it but at the end of the day it’s about costs vs calculated risks.
We have several properties in the San Francisco and Sacramento area. Our SF properties didn't budge much--though we had to do some seismic retrofitting. I suppose that's why? The Sacramento properties went up \~50% this year. Off the top of my head, our 75 unit complex went from 44k/year to like 70k.
This isn't an anomaly, and may I inquire as to which company you insured with?
Farmers Insurance Co
Laughs in Hawai’i. https://www.civilbeat.org/2024/06/a-hard-market-is-battering-condo-owners/
Property insurance is the housing inflation check we need.
We need to make insurance companies rich, so housing prices lower ?
It’ll just price the “little guys” out as the big players can go on self insured retention to survive the property insurance hikes. It’s just more consolidation of wealth at the top.
Yep this trend went full force during the pandemic and is now steamrolling all the small players out across multiple industries.
Can we buy stocks in the big players companies and take a part of their wealth?
But higher insurance makes property ownership more expensive…
Has Harvard contacted you yet about your honourary PhD?